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House Ways & Means Committee Approves Tax Extender Package | NAIFA GovWatch | Advocacy | NAIFA
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NAIFA GovWatch

U.S. House of Representatives Passes Tax Extender Bill

Issue: Tax

Date: May 21, 2008

Action Taken: This afternoon U. S. House of Representatives passed H.R. 6049, a $57 billion tax package, by a vote of 263-160. The bill would:

Why This Is Significant: The good news is this fully offset tax package was not paid for by changing the tax treatment of insurance products sold by NAIFA members. However, NAIFA members should continue to be on alert in the current “pay-go” environment because Congress will continue to look for ways to pay for new tax bills. At least one member of the Ways and Means Committee told a NAIFA lobbyist recently that while the Ways and Means Committee did not use any insurance “pay for’s” for H.R. 6049, the decision was “close.” A word to the wise!!

The package will be paid for by a modified form of a provision prohibiting certain hedge funds (and other investment managers) from participating in offshore nonqualified deferred compensation (NQDC) arrangements, and by delaying a rule due to take effect next year that would allow companies more flexibility in allocating their worldwide interest income.

Background-Reinstatements and Extenders: Among the tax rules to be reinstated is the provision to allow tax-free direct gifts to a charity from an IRA.  Also included is the $100/day penalty for violation of mental health parity rules. Four new tax provisions are also in the package: an above-the-line deduction for property taxes, relief for alternative minimum tax (AMT) taxpayers who exercise incentive stock options, equalization of deductibility rules governing certain attorney contingency fee arrangements, and modifications to the child tax credit.

Among the 2008 extenders is a one-year extension of the Subpart F exception for active financing -- a provision important to many insurance companies. Also included among the 2008 extenders is extension of the New Markets tax credit.

Next Steps:  The tax extender package will now go to the Senate. The Senate Finance Committee, after the Memorial Day recess, will consider a tax extender package that currently does not contain offsets. However, offsets are expected prior to committee action. Key Senators on the Finance Committee have conveyed a “lukewarm” willingness to consider the House bill’s NQDC offset. Thus, chances are better than even – although it is by no means certain – that the Senate extenders bill will include the offshore NQDC provision, too. It is also possible that the Senate will reject all revenue raisers, and approve the bill only without offsets.

President Bush announced on the morning of the vote (today, May 21) that he will veto any bill that resembles the House version of H.R.6049. In part, the veto would be based on the House bill’s offsets. President Bush opposes virtually all offsets as tax increases. It remains to be seen if Congress would be able to override a Presidential veto.

Neither the House nor the Senate bills will address this year's AMT issue. A "patch" – expected to cost some $70 billion this year – is needed to prevent millions of new taxpayers from becoming liable for the AMT this year. Action on this year's AMT patch is not likely until just before the year ends.

NAIFA Staff Contact: For additional information on this issue, please contact Michael Kerley at Mkerley@naifa.org.

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